Do Little and Try and Make Money or Add Real Value and More Risk?
So about four months ago, my business partner has an inside track with this HUGE DEAL! It was a Spanish client of his, whose husband passed away, after a legal battle with her late spouse's family, she won the right to sell the home that they had lived in for years. She had it one the market for close to a year and no takers, so she reached out to him for help.
One Challenge! She was close to twenty thousand dollars behind in mortgage payments and the house needed a lot of work. When I say a lot, I mean a lot!
3,700 square feet, five bedroom and four bathroom, huge kitchen and living area at the end of a cul de sac on a 10,000 square foot lot and if you know anything about Las Vegas, its a big lot. The house easily has an ARV of around $440,000 and we had an opportunity to buy it for $330,000!
My partner was ecstatic! Meanwhile at the time we are pushing six projects simultaneously, but I am enamored with the project as well. So, we sit on the deal until our load lightens up, and the more I look at the project, I know that in order to get top dollar, the rehab is not going to need to be $30,000 but more like $50,000 and there is NO POOL! So now I am less enamored. The other challenge is that among our all of our projects when I run the numbers for the same money, we run three to four small deals and have about twice the upside and not all of our eggs are in one basket.
So September hits and we have to make a move, I am not to keen on the project, but my partner straight up tells me he wants to do the deal.
In the past my partner and I had always talked about the fact that we believed that the reason a lot of properties don't sell or spend more time on market than they should, is because of bad real estate agents. And when I say bad, I mean agents who definitely should not be listing houses! From my own experience in Las Vegas I cannot tell you how many non responsive, slow agents there are but we have had experiences with many. The good news is, that there are a lot of great agents out there too, and we have some really great ones working with us too.
So anyway what to do now? We have a lot going on and this is a major risk and my partner is dead set to do the deal!
Then the idea struck me. Why don't we buy the property (too late to wholesale), re-market with our aggressive real estate agents and see what happens? We would market for three weeks to a month, if nothing happened, then okay, commit to the rehab. So we closed on the purchase in September, and started marketing, I even posted it on Bigger Pockets Marketplace. Of course the clock is ticking. We did pay to haul the trash out and and all the garbage in and around the house to make it more presentable. Then just this last week, lightening struck, and we got an offer and its going into escrow, not closed yet so cross your fingers!
The bottom line! We bought it for $332,000 and now selling for $375,000. But I really believe that there are properties and projects out there that can be "flipped" with little or no work. Now I know for me it goes a little against the grain, because I want to at least add some value to the proposition. Makes me feel I earned my money. What do you think? And perhaps this also addresses the mop and glow rehab versus really producing something of value with major improvements.
This is a bigger conundrum, as a flipper or rehabber which direction do you go? Each path carries it's own inherent risks, do too little and you will never sell at the price you are looking for, or, do too much, and have people go wow, but price yourself out of the market?
What is your approach?